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Natural Resource Production, Corruption, and Expropriation

Author

Listed:
  • Ramin Dadasov

    (University of Berlin)

  • Carsten Hefeker

    (University of Aachen)

  • Oliver Lorz

    (University of Aachen)

Abstract

We develop a formal model that looks at the mutually endogenous determination of foreign direct investments in natural resource-rich countries, the decision of host governments to expropriate these investments, and the level of corruption. Higher resource production makes expropriation more attractive from the perspective of national governments. A low expropriation risk is in turn an important determinant of international investments and is therefore associated with high levels of production. Moreover, resource production leads to high levels of corruption. Our theoretical results are confirmed by estimations of a simultaneous equation model for 50 resource-rich countries in which we endogenize expropriation risk, corruption, and resource production.

Suggested Citation

  • Ramin Dadasov & Carsten Hefeker & Oliver Lorz, 2014. "Natural Resource Production, Corruption, and Expropriation," MAGKS Papers on Economics 201436, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    • Handle: RePEc:mar:magkse:201436
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    File URL: http://www.uni-marburg.de/fb02/makro/forschung/magkspapers/36-2014_dadasov.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Natural resources; hold-up problem; foreign direct investment; corruption.;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption
    • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)

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